Michael W. CALLAHAN; Perry Beer Inc.; Peter G. Petousis; Norman Bernardi; Kathleen A. Kapres; Pete’s Beer Inc.; Lisa Martin; Anthony Santaguida; Thomas Santaguida; A.L. Abromovitz; Carl N. Altenhof; Douglas J. Berthold; Brew-Thru, Inc.; Allen E. Braun; Spike’s Beer Distributor, Inc.; Dino A. Deflavio; Carole A. DeMarco; Fred Demsher; E & C Price Distributing, Inc.; Frisch Distributing Co. Inc.; Sara J. Kelly; Mary Lou Libell; The Beer Warehouse; Armando Novelli; Martin P. Pekor; T.C. Valley Beer & Pop Company, Inc.; Loretta J. Perri; Green Valley Distributing Co., Inc.; Maryanne Santaguida; Ingeborg G. Schindler; Dennis Senneway; Michael T. Voelker; Voelker Distributing, Inc., Appellants, v. A.E.V., INC., a corporation, Beer and Pop Warehouse, Inc., a corporation; Brandt Distributors of Pittsburgh, a corporation; Earl Brandt, an individual; Frank B. Fuhrer Wholesale Company, a corporation; Frank B. Fuhrer, Jr., an individual; Jet Distributors, Inc., a corporation; Alfred M. Lutheran Distributors, Inc., a corporation; James Lutheran, an individual; Q.F.A., INC., a corporation; Red Sky, Inc., a corporation; Retail Services and Systems, Inc., a corporation; David J. Trone, an individual.
No. 98-3456.
United States Court of Appeals, Third Circuit.
Argued March 25, 1999. Filed June 30, 1999.
182 F.3d 237
Before: BECKER, Chief Judge, LEWIS and WELLFORD,* Circuit Judges.
*Honorable Harry Wellford, United States Circuit Judge for the United States Court of Appeals for the Sixth Circuit, sitting by designation.
Here, the District Court characterized the employees’ action as follows:
In this case, plaintiffs claims all arise from their contention that their bargaining representative and employer either agreed during collective bargaining to provide plaintiffs with certain seniority rights or fraudulently represented that they had done so. In this regard ... defendants’ characterization of plaintiffs’ claims as a classic hybrid action is accurate. The gravamen of plaintiffs’ complaint is that their employer is in breach of a collective-bargaining agreement, which was created in fact or by fraud and estoppel, and that the union defendants have breached their duty of fair representation by either failing to protect plaintiffs’ seniority rights or fraudulently misrepresenting the substance of a collective-bargaining agreement.
Beidleman, 1998 WL 254979 at *4. We agree with this characterization, and conclude that the employees’ complaint is a hybrid section 301 action.5
Because the employees concede that they filed their complaint more than six months after their cause of action accrued, see Appendix, Tab 3 at 15 (Complaint ¶ 74); Beidleman, 1998 WL 254979 at *3, n. 3, we find that the District Court correctly dismissed the employees’ claims on statute of limitations grounds.
III.
The employees also challenge the District Court’s March 11, 1998 order denying their motion to remand the case to state court. The employees contend that, “pursuant to the ‘well pleaded complaint rule,’ there was nothing in [the] Complaint which would have indicated any basis for jurisdiction of the federal courts.” Appellants’ Brief at 29. However, our conclusion that the employees’ state-law claims are completely preempted by section 301 is dispositive of the issues raised in the employees’ motion to remand. See Caterpillar, 482 U.S. at 393, 107 S.Ct. 2425 (1987) (“Once an area of state law has been completely pre-empted, any claim purportedly based on that pre-empted state law is considered, from its inception, a federal claim, and therefore arises under federal law ... The complete preemption corollary to the well-pleaded complaint rule is applied primarily in cases raising claims pre-empted by
IV.
For the foregoing reasons, we will affirm the District Court’s order denying the employees’ motion to remand and its order granting the appellees’ joint motion to dismiss.
Notes
H. Laddie Montague, Jr., Jerome M. Marcus (Argued), Bart D. Cohen, Berger & Montague, P.C., Philadelphia, PA, for Appellants.
Roslyn M. Litman (Argued), Martha S. Helmreich, Litman, Litman, Harris and Brown, P.C., Pittsburgh, PA, Counsel for Appellees A.E.V., Inc.; Beer & POP Warehouse, Inc.; Jet Distributors, Inc.; Q.F.A., Inc.; Red Sky, Inc.; Retail Services and Systems, Inc.; David J. Troné.
Michael Yablonski (Argued), Meyer, Unkovic & Scott, LLP, Pittsburgh, PA, Counsel for Appellees Frank B. Fuhrer Wholesale Company and Frank B. Fuhrer, Jr.
BECKER, Chief Judge:
Prior to 1985, the retail sale of beer in the Pittsburgh area was conducted exclusively by “mom and pop”-type beer distributorships, such as those operated by plaintiff Michael W. Callahan and his fifteen co-plaintiffs. In that year, defendant David Trone opened the first “Beer World” store, a supermarket-style beer distributorship ten times the size of the traditional stores. He opened four more such stores in the Pittsburgh area between 1986 and 1988, offering a larger selection and lower prices. This case involves antitrust and RICO claims arising out of the manner in which Trone operated these stores.
The Pennsylvania Liquor Code limits the ability of one entrepreneur to own or operate more than one beer distributorship. Trone apparently evaded these restrictions by placing the Beer World stores in the names of others, and, while acting as a “consultant,” effectively running the stores himself. According to the plaintiffs, Trone deceived the Pennsylvania Liquor Control Board (LCB) as to the true state of affairs by filing of false statements and affidavits.
Trone negotiated purchases of beer from wholesalers for all of the Beer World stores collectively. By doing so, the stores were able to purchase at a wholesale price lower than they would have been able to obtain in individual purchases. Central to this case are Trone’s negotiations with defendant Frank Fuhrer, the master distributor in the Pittsburgh area for Anheuser-Busch and Coors, in the course of which Trone allegedly forced Fuhrer to agree to give a quantity discount to the Beer World stores based on their purchases as a group, but not to give this discount to any other retailers.1 Trone is said to have been able to do this because the Beer World stores held a substantial portion (at least 25%) of the Pittsburgh beer market, and because he threatened to place Fuhrer’s products poorly within the stores. The Beer World stores allegedly received this discount even though their orders in the aggregate did not always reach the 4500-case level Fuhrer set for the discount. According to the plaintiffs, this discount was not disclosed to anyone else; it was not included on Fuhrer’s ordinary price list and was excluded from loading sheets posted at Fuhrer’s distribution center. Not surprisingly, the Beer World stores’ advantage in pricing, as well as other areas, cut sharply into the business of the smaller stores.
This state of affairs has spawned this unusual antitrust and civil RICO case with state tort law claims appended, brought by the plaintiffs against Trone, the Beer World stores, and Fuhrer.2 The plaintiffs’ antitrust theory is that Trone, his employees, and the separately incorporated stores have contracted, combined and conspired to restrain trade in beer in Allegheny County, by confronting wholesalers as a group and using their buying power and the threats described above to force the wholesalers to sell them beer at a price lower than that available to other retailers. The plaintiffs’ RICO theory is that Trone and others, by submitting false statements and affidavits to the LCB, as well as lying to a grand jury to cover up these false statements, were able to maintain illegal consolidated control of the Beer World stores. The plaintiffs submit that, as a
The District Court granted summary judgment for the defendants on all claims, including both the state tort law claims and the federal claims, and the plaintiffs have appealed. Strangely, antitrust liability issues are not presented in this appeal. The District Court, in deciding the defendants’ motion for summary judgment, did not consider antitrust liability issues at all; rather, the District Court disposed of the antitrust and RICO claims on the ground that the plaintiffs had not produced sufficient evidence that they suffered actual losses that were in fact a result of the defendants’ actions. Accordingly, and given the incomplete state of the record as presented to us by the parties, we do not intend to engage in an examination of the nature and scope of the plaintiffs’ theory or proof of antitrust violations (and, consequently, we express no view as to their correctness). Instead, we will assume, for the purposes of this appeal, that the plaintiffs can offer sufficient proof that the defendants engaged in antitrust violations throughout the relevant time periods. We will accordingly concentrate on the issues—actual loss and causation in fact (termed “fact of damage”) with respect to the antitrust claims, and proximate causation with respect to the RICO claim—that are fairly presented by this appeal.
In order to prove that the plaintiffs suffered losses and that the defendants’ antitrust violations caused the injuries as a matter of fact, the plaintiffs offered (1) testimony that various customers no longer came to their stores and that the customers explained that this was because the Beer World stores offered cheaper prices, along with (2) the report of an expert who opined that the defendants’ actions had caused harm to the plaintiffs. The defendants contend that this evidence is insufficient to meet the plaintiffs’ burden of production. They first submit that the plaintiffs’ anecdotal evidence is inadmissible hearsay on which the plaintiffs cannot rely. We disagree. The plaintiffs themselves can testify that the customers are in fact no longer shopping at their stores. Furthermore, although the reports of the customers’ statements are hearsay, they are admissible as evidence of the customers’ states of mind, i.e., their reasons for no longer shopping at the plaintiffs’ stores. This combined evidence is sufficient to meet the plaintiffs’ burden of producing enough evidence of loss and causation with respect to the plaintiffs’ antitrust claims to overcome a motion for summary judgment.
Also on the antitrust issues, the defendants argue that the plaintiffs’ proffered expert testimony is inadequate to prove fact of injury and causation because, inter alia, the expert failed to discuss numerous other possible causes of the plaintiffs’ losses. Furthermore, the defendants challenge the expert’s methodology for estimating the amount of damages. In spite of these flaws, we conclude that the expert’s testimony is sufficient to meet the plaintiffs’ burden of proof. At all events—taking into consideration both the customer evidence and the expert reports—we believe that the District Court erred in dismissing the plaintiffs’ antitrust claims on the ground that there was inadequate proof of fact of injury and causation in fact.
With respect to the RICO claim, the defendants contend that the alleged causal connection between the defendants’ fraud and the plaintiffs’ losses is not sufficiently close to meet the requirement of proximate causation. The plaintiffs’ RICO claim runs as follows: If Trone and others associated with the Beer World stores had
We think this case is similar to Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912 (3d Cir. 1999), in which we recently held that the plaintiffs had failed to prove proximate causation. In Steamfitters, we recognized three factors the Supreme Court has identified for determining proximate causation in RICO cases: the directness of the injury, the difficulty of apportioning treble damages among potential plaintiffs, and the possibility of other plaintiffs vindicating the goals of RICO. Given that the plaintiffs are relatively remote third-party “victims” of the fraud and that the LCB itself, or the wholesalers, could take steps to counter the defendants’ allegedly illegal actions, we think the plaintiffs’ claim meets none of the factors. Accordingly, we believe that the District Court properly dismissed the plaintiffs’ RICO claim, although not for the appropriate reason. For these reasons, we will affirm the judgment of the District Court to the extent it dismissed the plaintiffs’ RICO claim, but reverse its judgment with respect to the antitrust claims.
I. Facts and Procedural History
A. The Pennsylvania Beer Sales Regulation Scheme
Pennsylvania is a state in which temperance with respect to alcoholic beverages has always been an important policy, and statutory regulation of alcoholic beverage sales is extensive. The best known example, of course, is the “state store” system, under which liquor can only be sold in state-owned stores. With respect to malt and brewed beverages there is likewise a panoply of regulations. See, e.g.,
For present purposes, we are concerned with the regulation of beer sales. Under Pennsylvania law, beer sellers are divided into four classes for licensing purposes: manufacturers, master distributors, importing distributors and distributors. See
Highly relevant here is the extent to which Pennsylvania law limits the ability of a participant—e.g., a partner, member or shareholder—in one beer distributor to participate in another. See
B. Trone’s Beer Business Arrangements
Trone’s family had been in the beer business in Harrisburg and Pittsburgh for some time. While a business student at the University of Pennsylvania’s Wharton School, Trone apparently came up with a plan for a new type of beer distributorship business. Prior to his plan, beer distributors were typically small, low-capitalization “mom-and-pop” stores of the kind operated by the plaintiffs. They usually had ordinary distributor licenses and operated relatively small stores, selling beer by having people come in and ask for a particular brand. Trone’s idea was to create much larger stores, roughly ten times the square footage of the plaintiffs’ stores, to be operated like a supermarket. The cases of beer would be set out on shelves so that shoppers could wander through the store picking out particular brands themselves. In addition, Trone planned to offer soda and snacks in addition to the beer. This business plan became the “Beer World” concept.3 We chronicle the history and management structure of the stores because it bears on the contention that Trone improperly controls all of the stores in violation of the Pennsylvania liquor control scheme, an important part of the plaintiffs’ antitrust and RICO claims.
The first Beer World opened in the Pittsburgh area in 1985. Two more stores opened in Pittsburgh in 1986, followed by the last two in 1987 and 1988. The first store, incorporated as Jet Distributors, Inc., is apparently owned by Paul Piho, a childhood friend of Trone’s. Piho initially worked full-time in Chicago after the store opened. For a short time, he moved to Pittsburgh and managed the store. Currently, he works at a Delaware branch of a chain of liquor stores apparently owned by Trone. The second store is apparently owned by Trone’s wife, who for a time worked at the store, but presently spends less than five hours per week there. The third is apparently owned by Thomas Esper, a retired schoolteacher who apparently knows little about either the store or the liquor business. The fourth store is apparently owned by Trone’s sister, who has been in school or working at other jobs for the relevant period. Before 1990 and since 1994, she has lived outside of Pennsylvania. The last store was apparently owned by Albert Vivio, the father of one of Trone’s employees. He stated that he did not pay anything to own the store, but that Trone asked him to put his name on a license. He testified that he had “no duties at the store,” pursuant to an “agreement with Mr. Trone.”
Since the Beer World stores opened, Trone has been employed as a “consultant” for all of them. The plaintiffs allege, however, that Trone’s role in the stores is
Of particular relevance to the plaintiffs’ claims are Trone’s efforts in coordinating purchasing. Trone negotiated purchases of beer from wholesalers for all of the Beer World stores at once, obtaining an agreement that the Beer World stores could order together in order to obtain substantial volume discounts. The parties focus particularly on the negotiations between Trone and Fuhrer, who was the master distributor in the Pittsburgh area for Anheuser-Busch and Coors. All of Fuhrer’s negotiations regarding the prices he would charge Beer World stores were conducted with Trone.
Even before the Beer World stores opened, beer wholesalers offered various quantity discounts, although they were relatively small. From September 1, 1987, until the end of 1989, pursuant to an agreement with Trone, Fuhrer implemented a $.25 per case discount for purchases of 4500 or more cases, a purchase amount substantially larger than that required for other, smaller volume discounts wholesalers offered. The Beer World stores were the only ones ever able to achieve this level of purchasing, which they did by ordering as a unit. Although each store would place separate orders that were delivered separately, they were placed in the name of Jet Distributors, one of the stores, in order to aggregate the order size to reach the 4500 case level. Each store’s order was substantially less than this, usually in the range of 1000 cases. Although the plaintiffs attempted to take advantage of this discount, they were never able or permitted to do so.
Although the parties focus primarily on these quantity discounts, the plaintiffs allege that Trone was also able to obtain other benefits for the Beer World stores from wholesalers. For example, Fuhrer allegedly gave the Beer World stores a full-time employee, paid by Fuhrer, who stocked shelves at all of the stores. The plaintiffs further contend that Trone forced Fuhrer to sell him out-of-code beer, i.e., beer past its expiration/freshness date, at a discount. Apparently state law prohibits this and requires wholesalers to give retailers new beer in exchange for out-of-code beer. Trone allegedly got such beer at a discount and sold it while concealing the fact that it had expired from customers and inspectors sent by the beer brewers.
The plaintiffs criticize several aspects of these arrangements. First of all, they contend that Trone forced Fuhrer to agree not to give the discount to any other retailers. He allegedly could do so because, since the Beer World stores held a substantial portion (at least 25%) of the Pittsburgh beer market, Trone’s threat to place Fuhrer’s products in unfavorable locations within the stores carried force. Second, the plaintiffs point out that the Beer Worlds consistently received this discount even though their orders in the aggregate did not always reach the 4500-case level. In addition, many of the individual orders were fairly small: 29% were below 500 cases and 14% were below 200 cases, roughly the level at which the plaintiffs ordered. Finally, this discount was not
In response to the defendants’ actions, the plaintiffs instituted a state lawsuit against the defendants and convinced the Commonwealth to commence criminal proceedings. Neither of these actions achieved their desired results.
C. The Present Lawsuit
The plaintiffs filed the present lawsuit in March of 1992. Their primary claims include price fixing, engaging in a group boycott, and attempting and conspiring to monopolize the beer market in Pittsburgh, all in violation of the
The antitrust claims arise out of the joint operation of the Beer World stores. The plaintiffs contend that, by operating as a group, the Beer World stores were able to obtain an illegal competitive advantage. As evidence of such joint operation, they point to inter alia Trone’s collective control of the stores, the aggregated orders through Jet Distributing, and coordinated advertising. The plaintiffs contend that this conduct violated the antitrust laws in several ways. First, the “quantity” discounts the Beer World stores were able to obtain are said to have constituted unfair price fixing, i.e., the price for other beer distributors was fixed at a level $.25 higher than that for the Beer World stores. Second, the discounts are claimed to have resulted in a group boycott, i.e., Beer World convinced the wholesalers to sell to the other distributors only on unfairly disadvantageous terms. Finally, the plaintiffs allege that all of the actions of Trone and the Beer World stores constituted an effort to monopolize the beer retail market in Allegheny County, which includes Pittsburgh. These efforts were aggravated by the fact that, pursuant to the Pennsylvania Liquor Code, the plaintiffs could only purchase beer through the single, designated master distributor for each brand for Allegheny County.
The RICO claim arises out of the various statements made during and concerning the Beer Worlds’ efforts to obtain licenses from the LCB. First, various of the defendants and others allegedly lied about the true ownership of the Beer World stores in affidavits and other documents filed with the LCB via mailings in order to obtain and retain their licenses. Second, Trone and others allegedly lied before a grand jury investigating their operation when asked about the ownership of the Beer World stores. The plaintiffs contend that, as a result of this fraud, the Beer World stores were able to remain in business illegally under the control of Trone. Furthermore, Trone is said to have engaged in transactions involving the proceeds of this fraud, i.e., the income of the stores, by reinvesting the money in the stores, allegedly in violation of the money laundering statute. The plaintiffs contend that these various activities violated RICO.
D. The District Court’s Rulings
Following extensive discovery, the parties each moved for summary judgment on
The defendants moved for summary judgment on all of the plaintiffs’ claims. The District Court, in a series of orders, granted the defendants’ motions in part and denied them in part, and granted judgment in favor of the defendants on all of the plaintiffs’ claims. First, the District Court dismissed part of the plaintiffs’ RICO claim on statute of limitations grounds to the extent it was based on matters that occurred more than four years before the suit was filed.6 Second, the District Court dismissed all of the plaintiffs’ remaining claims—the antitrust and RICO claims—because it concluded that the plaintiffs had not offered sufficient evidence of fact of damage, i.e., loss and causation in fact.7
At this procedural juncture, reviewing the district court’s grant of summary judgment, we are not, as we would be upon reviewing a jury verdict, determining whether a plaintiff has brought sufficient evidence to justify the actual damages awarded. Rather, here, all we are concerned with is whether Rossi has established that the defendants’ illegal conduct was a material cause of [his] injury.
Rossi v. Standard Roofing, Inc., 156 F.3d 452, 484 (3d Cir.1998) (citation and quotations omitted); see also Stelwagon Mfg. Co. v. Tarmac Roofing Sys., Inc., 63 F.3d 1267, 1276 n. 19 (3d Cir.1995) (declining to consider whether the plaintiff had offered sufficient proof of the amount of damages, since the plaintiffs’ proof of loss in general was inadequate).
On appeal, our review of a District Court’s grant of summary judgment is plenary. See In re Baby Food Antitrust Litig., 166 F.3d 112, 123 (3d Cir.1999). “We evaluate the evidence using the same standard the District Court applied in reaching its decision.” Id. at 123-24.8
II. Antitrust Claims: Antitrust Liability
In the ordinary case, liability is the first question that must be decided. Accordingly, we would usually begin our analysis of this case with a discussion of whether the plaintiffs have produced sufficient evidence to prove that the defendants violated the
The plaintiffs’ antitrust claims begin with the premise that Trone coordinated the activities of all of the Beer World stores. In support of this contention, they note that Trone dictated most aspects of store policy, was in charge of hiring and managing employees, and had sole control of the stores’ accounts. In addition, Trone coordinated the stores’ interactions with other people, including wholesalers and customers. He negotiated a single set of wholesale prices for all of the Beer World stores. When one wholesaler would not
Furthermore, Trone and the stores allegedly conspired with wholesalers, Fuhrer in particular, so that the stores could obtain a competitive advantage over other retailers. Most prominently, the plaintiffs allege that Trone convinced Fuhrer to grant the stores a volume discount $.25/case lower than that available to any other retailer. This discount was concealed from other customers and wholesalers in several ways, and denied to the customers when they requested it. The Beer World stores’ orders pursuant to the discount were placed jointly. Furthermore, the discount was always given even though the minimum order required for the discount was not always met by the Beer World stores in the aggregate. In addition, the plaintiffs contend that the evidence shows that Fuhrer granted the stores other advantages, including special delivery terms and assistance in placing beer in the stores.
The plaintiffs contend that the advantages the Beer World stores obtained caused losses to the plaintiffs. As a result of the advantages, the Beer World stores were able to undersell the plaintiffs. Accordingly, the plaintiffs contend, they lost customers to the Beer World stores. The plaintiffs submit that these harms were particularly aggravated because of the geographical limitations the Liquor Code places on distributors. The Code requires that, for each brand of beer sold in a particular area, a specific wholesaler be designated as the master distributor. A beer retailer within that geographic area, must buy that brand either from the master distributor, or from someone who bought it from the master distributor. Since the plaintiffs allege that the defendants were conspiring with the master distributors, they were at a particular competitive disadvantage.
Although, as noted above, the plaintiffs identify several antitrust liability theories, they focus on one in particular in their briefs. They argue that the aforementioned actions constitute a group boycott on the part of Trone, the Beer World stores, and Fuhrer. They contend that Trone convinced Fuhrer to agree to sell beer to the Beer World stores at a lower price than would be available to any other retailer. They rest their legal theory on, inter alia, Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959), and Rossi v. Standard Roofing, Inc., 156 F.3d 452 (3d Cir.1998).
The defendants contend that the plaintiffs’ theory of antitrust liability is untenable for several reasons. First, they argue that the plaintiffs’ theory is simply a
We agree that price discrimination simpliciter—even when it violates the
The defendants also contend that the plaintiffs cannot prove that they engaged in a group boycott. Relying on Klor’s and Rossi, they submit that a group boycott only exists where the defendants’ actions result in the product’s not being available to the plaintiffs at all, or only being available at highly unfavorable terms. Of course, when one thinks of a boycott, one ordinarily thinks of preventing access to something entirely. Moreover, the defendants contend that the putative quantity discount is modest. The plaintiffs respond, however, that the evidence here is sufficient to conclude that, as a result of the defendants’ actions, beer was only available to them on highly unfavorable terms, i.e., $.25/case more than their competitors were paying.
Finally, the defendants contend that the antitrust violations were limited to a narrow array of conduct, specifically the $.25/case discount discussed above. Plaintiffs contest this point vigorously. They suggest that, solely with respect to Fuhrer, the evidence supports the conclusion that he engaged in other activities over a longer period of time, including delivery and product placement assistance, that gave the Beer World stores an advantage. Furthermore, the plaintiffs point to evidence that suggests that other wholesalers were giving the Beer World stores discounts and other benefits throughout a substantially broader time frame.
The District Court did not address these questions of antitrust liability because it thought it could dispose of the case on other grounds. In part, this may have been because the Court came to the case late, upon transfer of the case from the docket of another judge.9 In addition, it undoubtedly seemed to it to be a more straightforward way in which to dispose of the case. We imply no criticism of the District Court’s approach. As discussed further below, however, liability is not an issue that ultimately can be avoided in this case. The defendants have suggested that it is an appropriate alternative grounds upon which we can rest our judgment, but we do not think so. Although the parties have set forth in their briefs their legal analyses of the liability questions, the record as presented to us is not sufficiently adequate for us to give the careful and thorough consideration these issues merit. Since the case must go back to the District Court, we think these issues would benefit from further elaboration there in the first instance.
On remand, in determining whether the plaintiffs can prove that the defendants violated the
III. Antitrust Claims: Fact of Damage
The primary issue actually before us on the antitrust claims is whether the plaintiffs have proffered sufficient evidence to raise a genuine issue of material fact as to whether the defendants’ alleged antitrust violations caused harm to the plaintiffs. “[A] plaintiff must prove a causal connection between [the antitrust violation] and actual damage suffered.” Stelwagon Mfg. Co. v. Tarmac Roofing Sys., Inc., 63 F.3d 1267, 1273 (3d Cir.1995); see also Rossi v. Standard Roofing, Inc., 156 F.3d 452, 483 (3d Cir.1998) (“To recover damages, an antitrust plaintiff must prove causation, described in our jurisprudence as ‘fact of damage or injury.’” (citations omitted)); II Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 360e2, at 195 (“The plaintiff must show actual injury that was ‘caused’ by the violation.”). Although we suspect our factual analysis of loss and causation would apply equally to both the plaintiffs’ antitrust and RICO claims, we will focus in this section only on the former. We can put the RICO claim to the side because, although we are unsure that the District Court’s reasons for dismissing it was correct, we think they should be dismissed for other reasons, i.e., lack of proximate causation.10
In brief, the plaintiffs’ theory of antitrust fact of damage is as follows: Trone, the Beer World stores, and Fuhrer engaged in various joint actions, including but not limited to granting the Beer World stores secret discounts on wholesale purchases, which resulted in the plaintiffs’ losing business. In support of this theory of fact of damage, the plaintiffs offer two types of evidence: (1) testimony concerning customers who no longer shop at the plaintiffs’ stores and their statements about their reasons for not doing so; and (2) expert opinion testimony concerning the cause of the plaintiffs’ loss of income. We must decide whether the former type of evidence is admissible, and whether either is sufficient, individually or together, to establish actual injury and causation in fact.
A. Customer Evidence
1. Summary of the Evidence:
In opposition to the defendants’ motion for summary judgment, the plaintiffs offered deposition testimony concerning their customers. It included testimony of various plaintiffs that certain customers ceased purchasing beer from them after the Beer World stores opened, and that the customers stated that they had done so because the Beer World stores had cheaper beer. The District Court concluded that this testimony was inadmissible hearsay and therefore could not meet the plaintiffs’ burden of production to defeat the defendants’ motion for summary judgment.
Five of the plaintiffs offered testimony concerning customers’ behavior and statements. This testimony can be divided into two categories. First, several of the plaintiffs testified that, during the time at issue in this litigation, some people who had formerly been their customers stopped
Second, several of the plaintiffs testified that various customers, some identified and some not, told them that they no longer shopped at the plaintiffs’ stores because of the Beer World stores’ operations. Berthold testified that one customer, David Begg, told him that he was going to shop at Beer World because “I like selection” and “money talks.” App. at 755. Kapres also stated that she “had quite a few customers come in and say they wanted the same deal [lower prices] from me or they were just going to buy their beer from [Beer World], and I said I just can’t give you that deal.” App. at 819. In addition, Paul Kelly identified by name three customers of his who began to buy from Beer World, and discussed at length conversations with one of them in which the customer revealed that he was going to Beer World because of the prices. App. at 822-27.
As noted previously, the defendants contend that the plaintiffs have presented evidence of antitrust violations at most during a fairly brief period of time, for which only some of the customer evidence is relevant. The District Court did not consider this issue and, as we have stated, neither will we. Instead, we assume that the plaintiffs can establish antitrust violations throughout the relevant period. On remand, the District Court will have to analyze the extent of the defendants’ antitrust violations and then determine whether the plaintiffs’ evidence of loss and causation remains sufficient in light of the more
2. Admissibility:
The District Court, relying on our decision in Stelwagon Mfg. Co. v. Tarmac Roofing Sys., Inc., 63 F.3d 1267 (3d Cir.1995), held this evidence inadmissible, finding that the plaintiffs’ testimony concerning their customers’ statements was inadmissible hearsay. It also noted that, although this litigation has been proceeding for some six years, the plaintiffs had not taken the simple step of obtaining affidavits from customers concerning their reasons for ceasing to purchase beer from the plaintiffs. We disagree with the District Court’s reading of Stelwagon.
In Stelwagon, the plaintiff proffered the testimony of its employees concerning the statements of their customers. The employees proposed to testify, based on “out-of-court conversations with Stelwagon customers ... that the customers could and did purchase Tarmac MAPs from Standard at prices lower than Stelwagon’s prices.” Stelwagon, 63 F.3d at 1274. The plaintiff argued that this testimony was admissible to prove fact of damage, i.e., both loss and causation, under
The following are not excluded by the hearsay rule, even though the declarant is available as a witness: ... A statement of declarant’s then existing state of mind, emotion, sensation, or physical condition (such as intent, plan, motive, design, mental feeling, pain, and bodily health), but not including a statement of memory or belief to prove the fact remembered or believed unless it relates to the execution, revocation, identification, or terms of declarant’s will.
In Stelwagon, the plaintiff offered the customers’ statements to prove, not only causation, i.e., the reason it lost business—for which purpose it would be admissible evidence of motive under
We think that the District Court’s dismissal of the plaintiffs’ evidence on the basis of Stelwagon was inappropriate. The purpose for which the customers’ statements are offered in this case differs in substance from the purpose for which the court in Stelwagon found them inadmissible. In that case, the only evidence of actual loss, i.e., that customers stopped purchasing from the plaintiff, was the employees’ reports that customers had said that they were no longer buying from the plaintiff because the plaintiff’s competitors had lower prices. We concluded that this evidence could not be used to prove such loss. While the plaintiffs here have also offered similar testimony that their customers told them that they were purchasing beer from the Beer World stores and not the plaintiffs, they offer it only for “the [limited] purpose of proving customer motive,” for which purpose we found such evidence admissible under
In addition, however, the record contains other non-hearsay evidence of a type not before the court in Stelwagon, that the plaintiffs offer to prove the fact of loss, the issue for which the court in Stelwagon found the customers’ statements inadmissible. Here, the plaintiffs themselves testified that they knew of customers who used to purchase beer from them, but no longer did. This is direct evidence of an actual loss of customers. Although in Stelwagon we held that customers’ hearsay statements were not admissible to prove lost business, the plaintiffs’ own testimony about the actual behavior of their customers is not hearsay. Rather, it is admissible evidence of lost business, although not of the reason therefore. Thus, in the present case, the plaintiffs’ testimony that certain customers no longer purchased beer from them, coupled with their testimony concerning the customers’ statements of their motive, which is admissible hearsay under
3. Sufficiency of the Evidence to Prove Causation:
The next question is whether this evidence is sufficient to defeat a motion for summary judgment. “[O]ur jurisprudence does not require the summary judgment opponent to match, item for item, each piece of evidence proffered by the movant, but rather he or she must only exceed the ‘mere scintilla’ standard.” Rossi, 156 F.3d at 466 (citations and some quotations omitted). We recently confronted the question of the sufficiency of this sort of evidence of causation in antitrust cases. In Rossi, the plaintiff offered, in opposition to the defendants’ motion for summary judgment, the testimony of several potential customers that they would have purchased a certain product
Rossi has proffered evidence from five specific customers that they would have purchased GAF product from Rossi if he had been able to sell it to them, and Rossi’s inability to consummate those sales (leading to a loss of business and therefore injury) is a direct result of the alleged antitrust violation—the group boycott. In addition, Richard Droesch, Rossi’s partner in the failed Rossi Florence venture, backed out of that venture at least in part based upon his understanding that the company would not be able to get the products it needed, particularly GAF product, to compete successfully in the market. For all these reasons, we believe that the record supports Rossi’s allegations that he suffered antitrust injury, and that it was caused by the defendant’s [sic] allegedly unlawful actions.
156 F.3d at 485. We think that Rossi supports the conclusion that the plaintiffs’ testimony concerning their customers’ actions and statements is sufficient to meet their burden to produce evidence of loss and causation.
Initially, we reject the defendants’ attempt to distinguish Rossi on the ground that the customers there stated that they would have purchased product from Rossi but for circumstances that were the direct and intended result of the conspiracy. As noted previously, we have had to assume for the purposes of this appeal that the plaintiffs will be able to prove that the defendants violated the antitrust laws. The direct result of these violations would be the Beer World stores’ ability to sell beer at a lower price than the plaintiffs, the precise circumstance the customers cited as a reason for their actions.
The defendants also submit that Rossi is distinguishable because in this case there was no admissible evidence that the customers purchased beer from the Beer World stores. Of course, the defendants are correct that the testimony at issue is not admissible to prove that the customers purchased beer from the defendants. See Stelwagon, 63 F.3d at 1274. But the plaintiffs do not need to prove that point; in order to establish antitrust liability and damages, all the plaintiffs must show is that they suffered an economic loss as a result of the defendants’ antitrust violations; not that the defendants benefitted from that loss directly. See Rossi, 156 F.3d at 464-65 (plaintiff, in order to recover on an antitrust claim, must prove an antitrust violation and “that the plaintiffs were injured as a proximate result of that” violation (citation omitted)). As long as the plaintiffs can prove that they lost business, and that this loss was a result of the defendants’ antitrust violations, they can bring a successful antitrust claim.
At all events, Rossi makes no mention of any evidence, or even any requirement, that the customers in that case purchased product from the defendants instead of the plaintiff. See Rossi, 156 F.3d at 485. For all we know, the customers who offered testimony in Rossi simply decided not to purchase GAF product at all, instead of buying it from the defendants. What the customers did instead of purchasing product from the plaintiff is irrelevant, so long as there is evidence that they did not purchase from the plaintiff because of the defendants’ antitrust violations.
In addition to these points, we also find it significant that neither here nor in Rossi did the customer evidence purport to prove any specific amount of damages. Although the plaintiff in Rossi proffered the testimony of five customers, these customers gave no indication of exactly how
B. Expert Evidence
The plaintiffs also offered expert opinion evidence in support of their contention that the defendants’ alleged antitrust violations caused actual injuries to them. In particular, they offered the report and testimony of their primary expert, Garth Seidel, along with the report and testimony of their rebuttal expert, Brian Sullivan, to that effect. Neither the defendant nor the District Court raised a question about the admissibility of Seidel’s or Sullivan’s opinion. See Kumho Tire Co. v. Carmichael, 526 U.S. 137, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999); Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). The District Court concluded, however, that this evidence was insufficient as a matter of law to permit a finding of causation. In particular, the Court noted that Seidel’s opinion appeared to be based primarily on timing, and that he did not consider a number of possible alternative causes of the plaintiffs’ losses. It therefore concluded that Seidel’s report was deficient under the standards we have set forth in previous cases. We disagree.
1. Seidel’s Report:
Seidel concluded, based on the facts provided to him, that “the plaintiffs experienced significant
Next, he concluded that these lost profits “were caused by the Beer World Stores’ unique advantage.” App. at 830. He based this opinion initially on his conclusion that the Beer Worlds’ ability to purchase beer at a lower wholesale cost “must have had a significant impact on the market.” App. at 831. He also stated that the Beer World stores’ aggressive price advertising would have magnified the effect of the special discount. In addition, he examined Fuhrer’s profits between 1989 and 1994, and observed that they increased substantially during this period. Based on this, Seidel concluded that the malt-beverage market experienced no downturn during this time. Third, he noted that, beginning in 1991—after the grand jury investigation of Trone began—the Beer World stores’ volume of business declined each year until 1995, while at the same time the plaintiffs’ gross profits increased. Finally, he noted that two other stores had opened using a “supermarket” approach similar to the Beer Worlds’. One of them opened shortly after the Beer World stores, but failed within a matter of months in spite of aggressive promotions. The other was open from the mid-1970’s to the mid-1990’s, but did not appear to have had any effect on the plaintiffs. App. at 829-32.
The District Court found Seidel’s report inadequate to meet the plaintiffs’ burden of production because it failed to consider other market forces that could have explained the plaintiffs’ losses. The Court began with the proposition that “any analysis of antitrust, RICO or similar damage that fails to exclude or take account of any adverse effects caused by other factors, including lawful competition on the part of the defendants, is fatally flawed.” Dist. Ct. Op. IV, at 6. It observed that Seidel’s report did not include a comparison of costs and business practices, price advertising, the availability of pool-buying and other discounts, store size, purchasing capacity, or proximity to a Beer World store, any one of which might have provided an alternative explanation for the plaintiffs’ losses. Furthermore, it noted that Seidel had specifically failed to consider whether any other differences between the plaintiffs and the Beer World stores accounted for the plaintiffs’ loss of business to the latter. Given these omissions, the District Court concluded that Seidel’s report provided insufficient evidence of causation.
The plaintiffs contend that we must reverse the judgment because the District Court relied, in its legal analysis, on the district court’s opinion in Rossi rejecting Rossi’s proffered expert evidence, which opinion we later reversed on these exact grounds, although not until well after the District Court in the present case had issued its opinions. See Rossi v. Standard Roofing, Inc., 958 F.Supp. 976 (D.N.J. 1997), rev’d., 156 F.3d 452 (3d Cir.1998). As this question is before us on an appeal from a grant of summary judgment and our review is plenary, we will start from the premise that it is the defendants’s burden to show that Seidel’s report is inadequate to create a genuine issue of material fact as to causation. We begin with
2. Precedent: Stelwagon and Rossi:
We have twice recently considered the sufficiency of expert evidence offered as proof of causation in antitrust cases. See Rossi, 156 F.3d at 485-87; Stelwagon, 63 F.3d at 1275-76. In addition to the customer evidence discussed above, the plaintiff in Stelwagon offered expert opinion evidence to prove causation. In brief, “based on the assumption that but for Tarmac’s price discrimination, Stelwagon’s sales of MAPs would have tracked its sales of [other] products [not subject to anticompetitive practices], Dr. Perry concluded that Stelwagon lost $257,000 in profits as a result of Tarmac’s illegal pricing policy.” Stelwagon, 63 F.3d at 1275.12
We concluded that the expert’s testimony, although admissible evidence, was insufficient by itself to prove that the antitrust violations had in fact caused Stelwagon’s losses:
Significantly, Dr. Perry’s analysis failed to sufficiently link any decline in Stelwagon’s MAPs sales to price discrimination. The sales may have been lost for reasons apart from the price discrimination—reasons that Dr. Perry’s analysis apparently did not take into account. For example, the evidence showed that Stelwagon had higher overhead costs than his competitors. In addition, there was undisputed evidence that Stelwagon experienced other business complications during the relevant time period. In 1988, for example, Stelwagon terminated a vice-president, two territorial managers and three key employees for their part in an embezzlement scheme.
Stelwagon, 63 F.3d at 1275. Given that Stelwagon had not offered any other evidence of loss—as discussed previously, its employees’ anecdotal testimony concerning lost customers was not admissible to prove that it actually lost customers, see Stelwagon, 63 F.3d at 1274-75—we concluded that he could not meet his burden of proof, Stelwagon, 63 F.3d at 1275-76.
In Rossi, by contrast, we considered an expert opinion and found it sufficient to prove loss and causation. The expert in Rossi rested his calculation of damages on two assumptions:
First, he estimated that Rossi[’s businesses] would have achieved the same pattern of sales revenues (and revenue growth) beginning in 1989 and extending to 2008 that ABC’s Morristown sales branch actually achieved from 1990-93, operating out of the same location, with Rossi as branch manager.... The second major assumption in the Rockhill Report is that Rossi would have been able to manage [his proposed businesses] in the manner that he had run Standard’s Morristown branch from 1984-87. Rockhill used Standard’s Morristown branch financial statements to develop 14-year averages for [costs] and applied them to the sales estimate.
Rossi, 156 F.3d at 486 (footnote omitted). Based on these assumptions, the expert estimated Rossi’s losses as a result of the defendants’ antitrust violations.
We determined that this expert evidence was sufficient proof of causation to defeat a motion for summary judgment. We began our analysis with the recognition that the expert’s opinion was a “but for” damage model—one that “aggregates the defendant’s alleged violations and creates a hypothetical calculation projecting the
First, they do not attempt to measure the particularized effects of any specific alleged illegal activities, but rather rely on an aggregation of injury from all factors. Second, their hypothetical “but for” calculations usually rely upon unrealistic ex ante assumptions about the business environment, such as assumptions of perfect knowledge of future demand, future prices, and future costs that tend to overstate the plaintiff‘s damages claim. Thus, using a “but for” damage model arguably makes it impossible for the trier of fact to determine what, if any, injury derived from the defendant‘s antitrust violations as opposed to other factors, and courts sometimes reject such models as the basis of either causation or the amount of injury.
Rossi, 156 F.3d at 486 (citations omitted).
We concluded that, although the Rockhill Report rested on a “but for” damage model, this did not mean it was inadequate proof of causation, because it did not have the usual problems of “but for” damage models. We noted that, since the Report was based on the actual performance of other businesses—the business Rossi managed instead of running his own and the business he formerly managed—it did not involve any “unrealistic ex ante assumptions about the business environment.” We concluded that, “This kind of estimate, while perhaps not one upon which we would base our own personal investment decisions, nevertheless is sufficient to establish causation....” Rossi, 156 F.3d at 485.
We also rejected the defendants’ argument, upon which the district court had rested its decision, see Rossi, 958 F.Supp. at 991, that the Rockhill Report was inadequate because it failed to consider possible alternative causes of Rossi‘s losses. In particular, the defendants contended that Rossi‘s businesses failed because: “(1) they were start-up operations, (2) they were founded during one of the worst recessions ever to hit the New Jersey housing market, (3) Rossi, as a manager, failed to control his costs, and/or (4) Rossi worked on other ventures to the detriment and ultimate failure of both companies.” Rossi, 156 F.3d at 486. Although we recognized that these explanations might ultimately prove to be correct, we found that they were issues of fact best left to the jury, not reasons for concluding that the Rockhill Report was insufficient evidence of causation as a matter of law.
3. Application to Seidel‘s Report: We believe eve that our jurisprudence supports the conclusion that the plaintiffs, by offering Seidel‘s report, have produced sufficient evidence of causation to defeat a motion for summary judgment. Here, as in Rossi, Seidel‘s report rests on assumptions that are based on past performance, not guesses as to the future. His opinion was based on the assumption that the plaintiffs’ performance in the years before Beer World entered the Pittsburgh market provided an appropriate benchmark for their performance thereafter. This assumption does not rest on any “assumptions of perfect knowledge of future demand, future prices, and future costs” of the sort we condemned in Rossi. At most, it requires some consideration of whether general economic conditions were substantially similar before and after the Beer World stores opened. Seidel‘s observation that Fuhrer‘s sales increased substantially during the period after the Beer World stores opened strongly suggests that economic conditions were at least as good during this period. See App. at 831.
Initially, we note that, as discussed above, Seidel does discuss some of these factors the defendants suggest he should have—including general economic conditions—albeit not to the degree the defendants might prefer. In addition, he specifically noted a correlation between declining profits for the Beer World stores and increasing profits for the plaintiffs after the criminal indictment came down in 1991. Furthermore, we think that the factors Seidel failed to explain are more like those at issue in Rossi, in which we found the export‘s report acceptable in spite of certain gaps, than the factors in Stelwagon. In the latter case, the expert failed to discuss certain factors—higher overhead costs and embezzlement by the plaintiff‘s employees—about which the defendants introduced specific evidence. In Rossi, by contrast, the defendants argued that the Rockhill Report was inadequate because of factors the effects of which were pure speculation on the defendants’ part. Similarly, the defendants here propose numerous factors extrinsic to the defendants that might explain the plaintiffs’ losses. But they have not directed us to any point in the record that suggest that these concerns were actually relevant in this case. Accordingly, we will leave these questions to be resolved during further proceedings in the District Court. See Rossi, 156 F.3d at 487 (“[A]lthough one or more of these reasons ... might explain Rossi‘s failure and could conceivably result in a verdict for the defendants at trial ... they all involve factual disputes that need to be resolved by the trier of fact, not by this court on a motion for summary judgment.“).
Finally, the defendants make a number of arguments to the effect that Seidel‘s method of calculating the plaintiffs’ losses is unsupported and inappropriate. Seidel‘s calculations were based on the average or aggregate gross profits of the plaintiffs. The defendants contend that this use of averages was inappropriate, as it ignored potential differences among the plaintiffs. For instance, it ignores the problem that data was not available for all of the plaintiffs for all of the relevant time period. Furthermore, there is no way to determine based on this calculation how the damages are to be allocated among the plaintiffs. Finally, it masks the fact that some of the plaintiffs in fact had higher gross profits
As we stated in Rossi, at the summary judgment stage “we are not, as we would be upon reviewing a jury verdict, determining whether a plaintiff has brought forth sufficient evidence to justify the actual damages awarded.” Rossi, 156 F.3d at 484. Rather, before us is only the question whether the defendants’ unlawful actions caused the plaintiffs’ losses. See 156 F.3d at 484. Although in Rossi we did specifically note that the Rockhill Report would support a damages judgment in the amount the expert estimated, we did so only for the future guidance of the district court, and not for any purposes related to deciding motions for summary judgment. See Rossi, 156 F.3d at 486 n. 22 (“For the guidance of the district court on remand, we note that the Rockhill Report satisfies the relaxed Bigelow standard of proof for estimating the amount of damages ....” (emphasis added)).
In sum, we believe that, although the question is close, Seidel‘s report, like the Rockhill Report in Rossi, is sufficient to create a genuine issue of material fact concerning fact of damage. This is in contrast to the expert evidence offered in Stelwagon, in which the expert‘s opinion involved more speculation and failed to explain certain factors concerning which the defendants had presented specific evidence at trial.
4. Sullivan‘s Report: We find additional evidence of loss and causation, contributing to our ultimate conclusion that the plaintiffs have adduced sufficient evidence of fact of damage, in the report of the plaintiffs’ rebuttal expert, Brian Sullivan. Sullivan examined the defendants’ expert‘s report and rebutted it in part. Although his report focused primarily on antitrust liability issues, Sullivan observed that, between 1985 and 1993, beer distributors in Allegheny County failed at a rate nearly twice that in Pennsylvania as a whole. The plaintiffs argue that, since the record suggests no other distinction between Allegheny County and the remainder of the Commonwealth than the presence of Beer World stores, the logical conclusion is that these failures were caused by the Beer World stores.
The defendants contend that we cannot consider Sullivan‘s report for several reasons. First, they submit that we cannot do so because he functioned only as the plaintiffs’ rebuttal expert to respond to the defendants’ expert, and that his report and testimony therefore cannot be introduced to support the plaintiffs’ substantive case. The District Court refused to consider Sullivan‘s report on precisely these grounds. We think that that refusal was inappropriate. See Bowers v. Northern Telecom, Inc., 905 F.Supp. 1004, 1008 (N.D.Fla.1995) (holding that labeling of a witness as a rebuttal expert did not preclude consideration of his testimony to defeat a motion for summary judgment).
Second, the defendants submit that the distinction upon which the plaintiffs base their reasoning is flawed, in that Sullivan‘s own report reveals that there were Beer
Third and last, the defendants argue that Sullivan‘s report is irrelevant, since it focuses on predatory pricing and the Beer World operations in general, rather than the specific discriminatory discount. Once again, we note that the record before us is not sufficiently developed for us to address this contention. We will assume for present purposes that the Beer World stores committed antitrust violations. Accordingly, we leave the defendants’ contention to the District Court to consider in the first instance. We conclude that Sullivan‘s report provides some additional evidence of causation that, together with Seidel‘s report, meets the plaintiffs’ burden of production on the issue of actual loss and causation in fact.
C. Is the Evidence in the Aggregate Sufficient to Prove Causation in Fact?
At all events, we are satisfied that Seidel‘s report, as well as Sullivan‘s, in conjunction with the customer evidence discussed above, constitutes sufficient evidence of causation. In Stelwagon, we noted that there was no admissible evidence that the plaintiffs had suffered injuries attributable to the defendants’ price discrimination. See Stelwagon, 63 F.3d at 1275. We therefore held that the expert‘s report was not sufficient evidence of causation and loss. Here, by contrast, there is direct evidence—i.e., the plaintiffs’ testimony about their customers’ behavior—that identifies customers whom the plaintiffs lost as a result of the defendants’ actions. See supra section III.A. Furthermore, there is evidence—the customers’ hearsay statements, which are admissible under
IV. RICO: Proximate Causation
A. Basic Principles
In addition to establishing that the defendants’ unlawful actions in fact caused the plaintiffs’ losses, the plaintiffs must also establish proximate causation, i.e., that this causal connection is not too remote. Although this requirement applies to both antitrust and
The defendants contend that, with respect to the plaintiffs’
In Holmes, the Court identified three key factors in determining whether a
First, the less direct an injury is, the more difficult it becomes to ascertain the amount of a plaintiff‘s damages attributable to the violation, as distinct from other, independent, factors. Second,15 quite apart from problems of proving factual causation, recognizing claims of the indirectly injured would force courts to adopt complicated rules apportioning damages among plaintiffs removed at different levels of injury from the violative acts, to obviate the risk of multiple recoveries. And, finally, the need to grapple with these problems is simply unjustified by the general interest in deterring injurious conduct, since directly injured victims can generally be counted on to vindicate the law as private attorneys general, without any of the problems attendant upon suits by plaintiffs injured more remotely. Holmes, 503 U.S. at 269-70, 112 S.Ct. 1311 (citing, inter alia, Associated General Contractors, Inc. v. California State Council of Carpenters, 459 U.S. 519, 540-42, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983));15 see also Steamfitters, 171 F.3d at 932 (citing Holmes).
Both Holmes and Steamfitters clarified how the three factors set forth above would apply in particular cases.16
B. Anatomy of the Plaintiffs’ RICO Claim
The plaintiffs’
[C]ausation in plaintiffs’
RICO case ... is a simple claim: we say that absent the fraud, the Trone defendants would not have been able to assemble or operate the chain of stores, and that only by assembling the chain—by “aggregating” their purchases, as Mr. Fuhrer put it—were the Beer Worlds able to secure the discriminatory discount. The Trone defendants’ brief (at 40) asks rhetorically how David Trone‘s fraudulent statements to the LCB caused the discount, but the above two sentences show exactly how: absent the fraud, no chain; absent the chain, no discrimination. It‘s that simple.
Appellant‘s Reply Brf. at 13 (emphasis added; alterations in original). Although this is a clever and well-phrased summary, we disagree with its conclusion because the claim does not satisfy the specific factors the Court in Holmes identified as indicative of proximate causation.18 Reflection on these three factors reveals that the direct impact of the fraud is primarily on the LCB, not the plaintiffs.
C. Analysis
1. Directness of the Injury: The first factor, and the one on which we focused primarily in Steamfitters, is the directness of the relationship between the defendants’ actions and the plaintiffs’ injuries. See Holmes, 503 U.S. at 269, 112 S.Ct. 1311. This is significant because “the less direct an injury is, the more difficult it becomes to ascertain the amount of a plaintiff‘s damages attributable to the violation as distinct from other, independent, factors.” Holmes, 503 U.S. at 269, 112 S.Ct. 1311. The more difficult it is to distinguish between the effects of the defendants’ legitimate activities and their alleged racketeering actions on the plaintiffs, the more likely we are to conclude that proximate causation is lacking.
In Holmes, the Court found this factor indicated a lack of proximate causation. “If the nonpurchasing customers were allowed to sue, the district court would first need to determine the extent to which their inability to collect from the broker-dealers was the result of the alleged conspiracy to manipulate, as opposed to, say, the broker-dealers’ poor business practices or their failures to anticipate developments in the financial markets.” Holmes, 503 U.S. at 272-73, 112 S.Ct. 1311. In Steamfitters, we reasoned that
if the Funds are allowed to sue, the court would need to determine the extent to which their increased costs for smoking-related illnesses resulted from the tobacco companies’ conspiracy to suppress health and safety information, as opposed to smokers’ other health problems, smokers’ independent (i.e., separate from the fraud and the conspir-
acy) decisions to smoke, smokers’ ignoring health and safety warnings, etc.
Steamfitters, 171 F.3d at 933 (footnote omitted).
We believe that this case presents similar difficulties in ascertaining the proportion of the plaintiffs’ losses that can be attributed to the defendants’ alleged racketeering activity. We think it would be difficult to trace the chain from the fraud on the LCB to particular actions of the defendants, and then to particular portions of the plaintiffs’ losses, because the fraud only directly affects the LCB. In order to determine how the fraud affected the plaintiffs, we would need to analyze the extent to which the defendants were permitted to act as they did as a result of the fraud as opposed to normal operating procedures. More specifically, focusing solely on the issue of volume discounts, even if we could say that the plaintiffs’ losses were entirely attributable to the defendants’ ability to obtain such discounts, we would be hard-pressed to say that those discounts were entirely attributable to Trone‘s fraud on a third party, the LCB. Rather, it is likely that the defendants’ ability to obtain these discounts was attributable, in at least as substantial a part, to the size of the individual Beer World stores, Trone‘s negotiating ability, the operating methodology of the stores, or other legitimate actions. Accordingly, we conclude that, “As in Holmes [and Steamfitters], this causation chain is much too speculative and attenuated to support a
2. Apportionment of Damages: Holmes also directs that we inquire into the difficulty of apportioning damages among potential plaintiffs in determining whether proximate causation is present. “[R]ecognizing claims of the indirectly injured would force courts to adopt complicated rules apportioning damages among plaintiffs removed at different levels of injury from the violative acts, to obviate the risk of multiple recoveries.” Holmes, 503 U.S. at 269, 112 S.Ct. 1311. As a result, where granting plaintiffs relief would require us to apportion that relief among numerous plaintiffs of different standing, we are inclined to find an absence of proximate causation for those less directly involved.
Again, this factor as applied to the facts in Holmes suggested that proximate causation was missing. The Court noted that the broker-dealers had suffered at least as much at the hands of the defendants as their customers did, and thus any determination of liability to the customers would necessitate an inquiry into the defendants’ liability to the broker-dealers. The Court concluded that the possibility of treble damages in favor of both groups of plaintiffs militated in favor of finding no proximate causation for the former. See Holmes, 503 U.S. at 273, 112 S.Ct. 1311 (“[T]he district court would ... have to find some way to apportion the possible respective recoveries by the broker-dealers and the customers, who would otherwise each be entitled to recover the full treble damages.“). Likewise, in Steamfitters, we noted the potential difficulty in allocating recovery between the funds and their participants:
As we noted in our discussion of the Funds’ antitrust claims, more directly injured parties, i.e., smokers, would be unlikely to bring federal claims against tobacco companies for the same damages claimed by the Funds. Yet, as we also noted above, Fund participants who have not been fully reimbursed for their out-of-pocket costs that are traceable to defendants’ alleged fraud and conspiracy might bring
RICO or antitrust claims. Therefore, as in Holmes, a court adjudicating the Funds’RICO claims would need to consider the appropriate apportionment of damages between smokers and others such as the Funds who suffered economic losses as a result of the tobacco companies’ alleged fraudulent acts.
Steamfitters, 171 F.3d at 933.
We believe that these cases support the conclusion that the defendants’ fraud on
3. Vindication of Claims by Others: The final factor that the Court in Holmes recognized as significant for proximate causation analysis was whether the plaintiff‘s claim could be vindicated by another, more directly injured plaintiff. More specifically, the Court recognized that the searching inquiry into causation and apportionment of damages among plaintiffs discussed above is unjustified where the central focus of
In Holmes, the Court concluded that, since the broker-dealers were available to vindicate the public interest in deterring racketeering, it was unnecessary to extend proximate causation analysis to include the customers. “[T]he law would be shouldering these difficulties [of making fine distinctions among causes of the plaintiff ‘s injuries and apportioning recovery among potential plaintiffs] despite the fact that those directly injured, the broker-dealers, could be counted on to bring suit for the law‘s vindication.” Holmes, 503 U.S. at 273, 112 S.Ct. 1311. In Steamfitters, however, we found this factor to be less helpful. We noted initially that, although the funds’ participants might be able to pursue
The plaintiffs contend that this factor dictates a finding that proximate causation is present in this case because there is no other party that was more directly injured or that will otherwise be able to vindicate the public interest in deterring racketeering activity of the sort in which the defendants have engaged. Preliminarily, as noted above, the master distributors were injured by the defendants’ activities, and accordingly they could presumably serve at least as well to vindicate the public interest in deterring violations of the law. More significantly, the LCB—the direct victim of the defendants’ alleged fraud—is an additional possible alternative agent for vindicating the public interest.
As the plaintiffs point out, the LCB would not be able to bring a private civil
In fact, the Commonwealth indicted Trone on state racketeering charges predicated on tampering with public records and perjury before the LCB. See App. at 99. These charges arose out of the same activities that the plaintiffs identify as the racketeering acts upon which their
Although the Commonwealth cannot now bring civil
4. Summary: At all events, even to the extent that we have questions about whether the possibility of the Commonwealth bringing criminal racketeering charges against Trone and the other defendants falls within the scope of the third Holmes factor, such questions cannot alter our ultimate conclusion, based on the Holmes factors as a whole, that proximate causation is lacking here. To paraphrase Steamfitters, “we are unconvinced that [the potential lack of alternative plaintiffs] is sufficient to overcome the concerns about apportioning damages and, most fundamentally, the remoteness of [the plaintiffs‘] alleged
D. Policy Issues: Were the Plaintiffs the Intended Beneficiaries of the Liquor Code?
The plaintiffs also contend that proximate causation is present in a civil
The purpose of the Pennsylvania Liquor Code is to promote temperance, not to protect small-business owners or ensure competition among beer retailers:
The provisions of [the Liquor Code] are intended to create a system for distribution that shall include the fixing of prices for liquor and alcohol and controls placed on prices for malt and brewed beverages, and each of which shall be construed as integral to the preservation of the system, without which system the Commonwealth‘s control of the sale of liquor and alcohol and malt and brewed beverages and the Commonwealth‘s promotion of its policy of temperance and responsible conduct with respect to
alcoholic beverages would not be possible.
The plaintiffs submit that even if the purpose of the Liquor Code is not to protect retailers like themselves, the effect of the Code, and one of the goals of the LCB in enforcing it, is to protect retailers and competition. But although the LCB‘s efforts to enforce the Code may have resulted largely in a predominance of beer retailers similar to the plaintiffs, that does not render large-scale stores like the Beer World stores automatically illegal. Accordingly, we do not think that the principle of Rodriguez, were we to adopt it, would compel a finding of proximate causation. We will therefore affirm the District Court‘s grant of summary judgment on the plaintiffs’
For the foregoing reasons, the judgment of the District Court will be reversed to the extent that it granted summary judgment to the defendants on the plaintiffs’ antitrust claims, but affirmed in all other respects, and the case will be remanded to the District Court for further proceedings in accordance with this opinion.
WELLFORD, Senior Circuit Judge, concurring in part and dissenting in part:
I concur in Chief Judge Becker‘s excellent analysis of the antitrust claims of plaintiffs against the defendants. I therefore share in the conclusion that the district court was in error in granting summary judgment to defendants on the antitrust claims before the court.
My disagreement is in respect to the treatment of the
First, however, I construe plaintiffs’
Holmes involved the issue of standing and of proximate cause under
At bottom, the notion of proximate cause reflects “ideas of what justice demands, or of what is administratively possible and convenient.” W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts § 41, p. 264 (5th ed. 1984).... [One requirement is] some direct relation between the injury asserted and the injurious conduct alleged.
Was the plaintiff in Holmes simply complaining about “harm flowing merely from the misfortunes visited upon a third person by the defendant‘s acts...“? Id. Holmes held that SIPC was complaining about an indirect injury, but it is important to consider why it reached that result. First, Holmes noted in footnote 19 that SIPC was not claiming to sue under a claimed right of any customer who actually purchased the manipulated securities. Id. at 272 n. 19, 112 S.Ct. 1311. Second, it is important to note that in Holmes, the broker/dealers, directly defrauded, who went into bankruptcy “have in fact sued” the same defendants. Id. at 273, 112 S.Ct. 1311. Those third parties might then vindicate the public interest in recouping the economic damages caused by the fraudulent defendants, and in punishing them by treble damages.
Because of the potential of multiple claims against defendants seeking damages as a direct result of the same illegal predicate acts and the necessity of difficult and complex apportionment, Holmes decided in favor of defendants that SIPC‘S damages claims did not meet the proximate cause test. Our case is a very different one factually from Holmes. Plaintiffs here assert actions arising from defendants’ illegally attained status based on asserted fraud perpetrated on the state of Pennsylvania. This does not, in my view, vindicate the rights of private parties, such as plaintiffs, arising out of that fraud.1 Unlike defrauded third party customers who had also sued defendants for the
In sum, I cannot construe Holmes as helpful to defendants in this case. Steamfitters Local Union No. 420 v. Philip Morris, Inc., 171 F.3d 912 (3d Cir.1999), I think, is distinguishable. In Steamfitters, customers or purchasers of the tobacco products had brought suit, or might be expected to bring suit, to vindicate plaintiff‘s clearly indirect claim. These customers or purchasers had varying degrees of proximate contributory or comparative negligence or knowledge about the danger of the tobacco product used or sold to them. Respectfully, I do not believe plaintiffs’ claims in the instant case to be as attenuated as in Steamfitters. It is closer to the standing and proximate causal relationship of plaintiff in Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d 494 (3d Cir.1998), in my view.
I do, therefore, respectfully dissent on the
We recently explained that attorney misconduct can give rise to equitable tolling only in unusual circumstances. See Seitzinger v. Reading Hosp. & Med. Ctr., 165 F.3d 236, 240 (3d Cir.1999). The plaintiffs contend that such unusual circumstances are present here, because their attorney allegedly was conflicted in that he also represented Fuhrer, and because, unlike Seitzinger, the lack of information on which to base a claim was at least arguably a result of the defendants’ fraud. Furthermore, the plaintiffs note that, given the tremendous difficulties they faced in obtaining adequate discovery from the defendants in this case, the defendants cannot contend that the plaintiffs would have been able to obtain sufficient discovery in the previous state case. On the other hand, the defendants point out that, even if they fraudulently concealed certain facts, the plaintiffs were aware of those facts by the end of 1987. We need not decide this issue, because we will affirm the District Court’s dismissal of the RICO claim in its entirety on other grounds.
The plaintiffs’ common-law claims are that Fuhrer issued price lists that were fraudulent because they did not state the volume discount the Beer World stores received, and that Trone and Fuhrer conspired to misrepresent the prices through the same mechanism. Claims for common-law fraud and conspiracy are governed by a two-year statute of limitations. See
The other RICO claim was based on Fuhrer’s allegedly fraudulent mailing of price lists that did not include the $.25/case volume discount offered to the Beer Worlds. This discount was begun in September of 1987. Fuhrer did not mail a price list thereafter until March of 1988, and the plaintiffs were aware of the discount by October of that year. The District Court analyzed whether this constituted a “pattern of racketeering activity,”
Moreover, contrary to the defendants’ apparent suggestion, we do not think that the fact that the declarants are not specifically identified is relevant for determining whether their statements fall within the
The customers’ statements in this case, however, are different. In a practical sense, their identities are not important. The relevance of their statements depends only on the fact that they were the plaintiffs’ customers, not their particular identities. Furthermore, we do not think that the admissibility of their statements under the
In United States v. Mitchell, 145 F.3d 572, 576-77 (3d Cir.1998), we held that the identity of the declarant is a substantial, although not determinative, factor in determining whether a hearsay statement is admissible under the present sense impression or the excited utterance exceptions to the hearsay rule. The proposed evidence in that case was an anonymous note purportedly identifying a getaway car. We held that the note was not admissible as a present sense impression or excited utterance because there was no evidence that the unidentified declarant personally perceived the event or condition about which the statement is made. With respect to a state-of-mind statement, however, it is only important that the declarant be the person whose state of mind the statement concerns, which is true by definition.